Published January 5, 2023
FMCSA Proposes MAP-21 Mandated Regulations Regarding Broker/Freight Forwarder Financial Security
The Federal Motor Carrier Safety Administration (FMCSA) has issued a much-delayed Notice of Proposed Rulemaking (NPRM) regarding broker and freight forwarder financial responsibility to address mandates set down by Congress in MAP-21, legislation that passed in Congress in 2012. The NPRM follows an Advanced Notice of Proposed Rulemaking (ANPRM) issued on September 27, 2018. The agency is accepting comments on the NPRM for 60 days.
The FMCSA is proposing action in 5 areas:
- For brokers and forwarders relying on trust funds to meet financial responsibility obligations (as opposed to the more common surety bond), FMCSA has proposed a requirement that there be “assets readily available,” meaning assets that can be liquidated within seven days of the event triggering the need to make payment. Prohibited assets include, among other things, interests in real property, intercompany agreements or guarantees, and internal letters of credit.
- FMCSA is proposing to clarify that when there is a drawdown on a surety bond or a trust fund (essentially, a claim paid), the surety or trustee is to provide electronic notice to FMCSA, and the agency will issue notification of suspension of operating authority giving the broker or forwarder seven days to respond. Suspension will occur if the drawdown is not remedied.
- FMCSA is proposing a definition of “financial failure or insolvency” as a bankruptcy filing or state insolvency filing and proposing that if the surety underwriter or trustee is notified of an insolvency, they are obligated to notify FMCSA. The insolvency would trigger a requirement that the surety underwriter or trustee initiate cancellation of the financial responsibility and would result in FMCSA publishing notice of the insolvency in the FMCSA Register (not the Federal Register).
- FMCSA is proposing a process to review and suspend surety and trust fund providers.
- FMCSA is removing an existing rule that allows “loan and finance companies” to serve as trustees but is not requiring that trusts be overseen by licensed trust companies.
FMCSA has decided not to address the following:
- Allow use of group surety bonds or trust funds
- Set a mandatory response time in which brokers or forwarders must respond to claims
- Propose different regulations related to regulated household goods brokers or forwarders
If you have questions regarding the NPRM, contact Greg Feary, Jeff Toole, or Nathaniel Saylor.
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News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.
Published January 5, 2023
FMCSA Proposes MAP-21 Mandated Regulations Regarding Broker/Freight Forwarder Financial Security
The Federal Motor Carrier Safety Administration (FMCSA) has issued a much-delayed Notice of Proposed Rulemaking (NPRM) regarding broker and freight forwarder financial responsibility to address mandates set down by Congress in MAP-21, legislation that passed in Congress in 2012. The NPRM follows an Advanced Notice of Proposed Rulemaking (ANPRM) issued on September 27, 2018. The agency is accepting comments on the NPRM for 60 days.
The FMCSA is proposing action in 5 areas:
- For brokers and forwarders relying on trust funds to meet financial responsibility obligations (as opposed to the more common surety bond), FMCSA has proposed a requirement that there be “assets readily available,” meaning assets that can be liquidated within seven days of the event triggering the need to make payment. Prohibited assets include, among other things, interests in real property, intercompany agreements or guarantees, and internal letters of credit.
- FMCSA is proposing to clarify that when there is a drawdown on a surety bond or a trust fund (essentially, a claim paid), the surety or trustee is to provide electronic notice to FMCSA, and the agency will issue notification of suspension of operating authority giving the broker or forwarder seven days to respond. Suspension will occur if the drawdown is not remedied.
- FMCSA is proposing a definition of “financial failure or insolvency” as a bankruptcy filing or state insolvency filing and proposing that if the surety underwriter or trustee is notified of an insolvency, they are obligated to notify FMCSA. The insolvency would trigger a requirement that the surety underwriter or trustee initiate cancellation of the financial responsibility and would result in FMCSA publishing notice of the insolvency in the FMCSA Register (not the Federal Register).
- FMCSA is proposing a process to review and suspend surety and trust fund providers.
- FMCSA is removing an existing rule that allows “loan and finance companies” to serve as trustees but is not requiring that trusts be overseen by licensed trust companies.
FMCSA has decided not to address the following:
- Allow use of group surety bonds or trust funds
- Set a mandatory response time in which brokers or forwarders must respond to claims
- Propose different regulations related to regulated household goods brokers or forwarders
If you have questions regarding the NPRM, contact Greg Feary, Jeff Toole, or Nathaniel Saylor.
News from Scopelitis is intended as a report to our clients and friends on developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion.